DBRS Confirms Ratings of Inter Pipeline (Corridor) Inc. at A (low) and R-1 (low) with a Stable Trend

DBRS Limited (DBRS) confirmed the Issuer Rating and Senior Unsecured Debentures rating of Inter Pipeline (Corridor) Inc. (Corridor or the Company) at A (low) and confirmed the Company’s Commercial Paper rating at R-1 (low). All trends are Stable. Corridor is 100% owned by Inter Pipeline Ltd., which is rated BBB with a Stable trend by DBRS.

Corridor has exclusive rights to transport diluted bitumen produced by the Athabasca Oil Sands Project (AOSP) in Alberta and provides a vital link between the Muskeg River Mine and the Jackpine Mine north of Fort McMurray, Alberta, and Canadian Natural Resources Limited’s (CNRL; rated BBB (high) with a Stable trend by DBRS) Scotford Upgrader (SU), which is adjacent to Shell Canada Limited’s (Shell) Scotford Refinery near Edmonton. Shell operates the SU and the Quest carbon capture and storage project.

Corridor’s business risk profile continues to be supported by a cost-of-service-based firm service agreement (FSA) with relatively strong investment-grade shippers that are also the AOSP sponsors: CNRL owns 70%, including 60% through its affiliate, Canadian Natural Upgrading Limited; Chevron Corporation (rated AA (low) with a Stable trend by DBRS) owns 20%; and Shell owns 10%. The FSA extends to 2049 and allows recovery of substantially all operating costs, including depreciation, taxes and financing costs, plus a return on equity on the rate base, which eliminates volume or commodity price risks and provides a steady stream of cash flows. DBRS believes that the shippers’ strong commitment to the AOSP incentivizes them to fully utilize the pipeline.

DBRS expects Corridor to maintain a stable financial profile with predictable cash flows supported by the long-term FSA in the future. The Company’s ratings incorporate DBRS’s review of financial information and other relevant information that will not be disclosed in DBRS’s rating report for Corridor, as Corridor is a private company. Although an upgrade to Corridor’s ratings is unlikely in the near term, the ratings could come under pressure should the credit quality of the shippers deteriorate because of sustained weakness in oil prices, or should the existing shippers be replaced or consolidated by shippers with weaker credit profiles.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodologies are Rating Companies in the Pipeline and Diversified Energy Industry and DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers, which can be found on dbrs.com under Methodologies & Criteria.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrs.com.

This rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

DBRS will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at info@dbrs.com.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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